US economy grew 3.5% in Q3

The US economy grew at an annual rate of 3.5 percent in the third quarter, much stronger than expected, according to Commerce Department data released Thursday.

The pace of gross domestic product growth followed a strong 4.6 percent expansion in the second quarter, when the world’s largest economy rebounded from a first-quarter contraction linked to unusually severe winter weather.

Economists had expected third-quarter growth would slow even more, to a rate of 3.0 percent according to the average estimate.

In its first estimate for the July-September period, the Commerce Department said the deceleration largely was due to slower business investment from the second quarter, when an increase had helped boost growth.

Consumer spending, the key driver of the world’s largest economy, also cooled, rising 1.8 percent after increasing 2.5 percent in the prior quarter.

Disposable personal income grew 2.7 percent, down from a 4.4 percent rise in the second quarter.

In a related development, new claims for US unemployment insurance benefits last week held to the recent low levels that have underpinned the tightening US jobs market, the Labor Department reported Thursday.

Initial jobless claims, a sign of the pace of layoffs, came in at 287,000 in the week to October 25, up slightly from 283,000 the previous week.

The four-week moving average was 281,000, compared to 352,500 a year ago.

In its new policy statement Wednesday, the Federal Reserve turned more optimistic about employment, saying that worrisome slack in the market appeared to be diminishing as job creation has picked up this year.

With the US jobless rate now at 5.9 percent, the Fed wound up its asset buying stimulus program that dates back to the 2008 crisis, citing “substantial improvement” in the labor market.